Car warranty – Dealers make money!

If you are a new car owner, you would most probably fail to understand that your smart car dealer made a neat profit when he sold you the sharp car and the extended warranty on it. Many car buyers fail to do that. They do not understand what the dealer is making out of the whole exercise.

For a new car owner like you there is one question that can be asked to the dealer, i.e. What are the out-the-door costs? Some dealers try to hide a huge chunk of profits in the name of extra fees and products that are of no use to you. At some dealerships, the out-the-door costs are abbreviated as TTL or tax, title and license. This actually means that in addition to the car warranty price and the car price, you end up paying the following costs:

• State and local sales tax
• Department of motor vehicle fee
• Documentation fee

A car dealer should be the last resort to shop for auto extended warranty or auto warranty. There are innumerable websites talking about companies like: WarrantyDirect.com, Autobytel.com, Autoweb.com, CarSmart.com, eBay.com, Autos.yahoo.com and Edmunds.com, etc.

No matter what your dealer tells you, do not purchase an auto extended warranty from a car dealer. This can be the dealer's most profitable product. He would get to gain a lot from the auto warranty.

Many times car warranty buyers or new car owners do not know that they can negotiate the price of the auto warranty just as they did with the car. The working assumption is that the car dealers pay about 50% less than the original price for the auto warranty.

In any case, a buyer should never pay more than two-thirds of the asking price for the auto warranty. One most important fault that people end up doing is that they go in for a double warranty! The manufacturer's auto warranty or the car warranty covers all the items covered by it.

Many car dealers resell the extended auto warranty to the non-discerning buyer at 2 or 3 times what they paid. There have been many complaints from buyers who have been cheated by the dealers. The dealers tried to sell them new auto warranties for $3,000!

Dealers never show the contract beforehand and so its all a verbal promise. Dealer auto warranties have too many restrictions and weasel clauses as compared to world-class auto warranties that can be bought for 50% lower costs.